Investing in senators, not drugs

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Amgen is a very successful drug company and it is a poster child for what is wrong with the brand name pharmaceutical industry (Big Pharma). Big Pharma has had a rough time recently. Despite spending more than ever (over $50 billion annually) on R& D, the number of new branded drug launches has been essentially flat for years. Generics have overtaken brands in total prescriptions and are slated to quickly gain another 20 percent market share as more brands lose patent protection. Over the past five years, the 10 largest branded drug companies have eliminated over 200,000 jobs.

But there is one area of “research and development” where Big Pharma investments have paid off fantastically and that is in Capitol Hill lobbying and political contributions. During the recent fiscal cliff negotiations – which supposedly had something to do with closing special interest loopholes – Amgen's army of 74 Washington lobbyists team-tackled the Senate Finance Committee and got their Sensipar drug a special two-year exemption from being bundled in with Medicare kidney dialysis payments. This Amgen exemption, which cost taxpayers $500 million, is on top of another special two-year exemption for Sensipar that was scheduled to expire in 2014.

Developing new drugs is risky, takes many years and costs, on average, over a billion dollars to produce a single marketable product. Why should Amgen or any other pharmaceutical company make those risky investments when giving $67,750 to Sen. Max Baucus, the Senate Finance Committee chairman, $59,000 to Sen. Orin Hatch, the committee's ranking Republican, $73,000 to Sen. Mitch McConnell, the Senate minority leader and $141,000 to President Obama's political campaigns, among other political pipeline investments, gets them a half-billion dollar Medicare special exemption payment?

The annual returns on pharmaceutical R& D investment average around 12-14 percent, but Amgen's returns on the $5 million it has invested in Washington politicians since 2007 is in the billions of dollars. Amgen plays the political lobbying game better than Kevin Spacey's new fictional series, “House of Cards,” could ever portray. They are equal opportunity bipartisan enablers for anyone who has the political juice to get their wishes written into law.

As far as I know, Amgen doesn't grow much corn or raise many hogs, but it certainly knows how to scatter feed in the political trough. Former chair of the Senate Finance Committee Chuck Grassley represents Iowa and used to get more political contribution money from Amgen than farming interests or any other source. Now that he is no longer chair or ranking member of that committee, Amgen is only 19th on his list of political contributors. Amgen probably counts its investments in junior Congress members the way some drug companies count experimental drugs in early clinical trials.

Amgen even had the chutzpah to squeeze this half a billion dollars from the Senate Finance Committee and the administration in December at exactly the same time it was settling civil and criminal penalties with the Justice Department for $762 million. This is the largest penalty in the history of the biotech industry. It relates to allegations that Amgen had been giving “liquid kickbacks” to doctors for using another Amgen kidney dialysis drug, Aranesp, off-label. A former employee, Kassie Westmoreland filed a whistleblower suit claiming that Amgen overfilled vials of Aranesp to give doctors extra medicine at no charge. She alleged Amgen then helped doctors to bill Medicare and private insurers for this surplus amount.

There are so many things wrong with this picture of a drug company as lord of the political contributions. It is the epitome of special interest lobbyists paying politicians millions so they can sock it to the taxpayers for billions.

It further corrupts our political system since Amgen buys politicians on all sides, forcing each of them to jump ever higher for re-election political contributions and counter-contributions and in return gets them to provide huge favors from the public purse.

But the biggest problem it highlights is inevitable as government grabs bigger and bigger pieces of the health-care system through public programs like Medicare, Medicaid and Obamacare, as well as through increasing taxes and regulations that can be subjected to special-interest lobbying loopholes. Every drug company, not to mention every hospital association and physician organization, will increasingly find that the key to success is not better drugs or better health care but better lobbying clout in Washington.

Joel W. Hay, PhD, is a professor at USC Schaeffer Center for Health Policy and Economics.

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